Fiscal Barriers to Trade Lecture Notes PDF

11.09.24 Fiscal Barriers to Trade FREE MOVEMENT OF GOODS: PART I Dr. Calum Alasdair Young  Learning objectives: You will be able to identify lawful and unlawful charges under Article...

11.09.24 Fiscal Barriers to Trade FREE MOVEMENT OF GOODS: PART I Dr. Calum Alasdair Young  Learning objectives: You will be able to identify lawful and unlawful charges under Article 30 TFEU. You will be able to identify the measures prohibited under Article 110 TFEU. You will be able to distinguish between the two components of Article 110 TFEU. You will understand the difference between Article 30 and Article 110. 2 Fiscal Barriers to Trade - Young  Structure Part I: − Article 30 TFEU − Case Law Part II: − Article 110 TFEU − Case Law 3 Fiscal Barriers to Trade - Young  Significance of this for the Internal Market First part of functional free movement of goods - fiscal barriers (this week) - non-fiscal barriers (next week) Abolition of customs duties and equivalent charges key to functioning of the Customs Union Knock-on effects for external customs so it’s important to gain the benefit Essential to the function of the Single Market 4 Fiscal Barriers to Trade - Young  Fiscal Barriers to Trade Customs Charges (Article 30 TFEU) Taxation (Article 110 TFEU) Other levies can also be caught by the provisions depending on circumstances 5 Fiscal Barriers to Trade - Young  Article 30 TFEU: “Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States. This prohibition shall also apply to customs duties of a fiscal nature.” 6 Fiscal Barriers to Trade - Young  Two prohibitions 1. Customs duties - A tax payable to customs when importing or exporting goods. 2. Charges having effects equivalent to customs duties (CEE). 7 Fiscal Barriers to Trade - Young  Effect not purpose No matter what the purpose of the levy, caught by Article 30 anyway Case 7/68, Commission v Italy - (tax on export of artistic, historical, and archaeological items to protect artistic heritage) 8 Fiscal Barriers to Trade - Young  Charges having equivalent effect CEEs also prohibited by Article 30 Stops MS from having prohibited duties but not calling them that 9 Fiscal Barriers to Trade - Young  What is a CEE? “Any pecuniary charge, however small and whatever its designation and mode of application, which is imposed unilaterally on domestic and foreign goods by reason of the fact that they cross a frontier […] constitute a CEE […] even if it is not imposed for the benefit of the State, is not discriminatory or protective in effect.” Source: Commission v. Italy, Case 24/68, para. 9. 10 Fiscal Barriers to Trade - Young  What is a CEE? In Diamantarbeiders, the CJEU struck down a Belgian charge imposed on imported diamonds to be paid into a social fund for workers. Emphasis again on the effects rather than on the purpose. 11 Fiscal Barriers to Trade - Young  No minimum threshold However small: charges of a negligible amount are also prohibited – ‘any pecuniary charge’ 12 Fiscal Barriers to Trade - Young  The form does not matter Whatever its designation and form of application. Example: the costs of health inspections cannot be charged to the importer. “If public health inspections are justified […] the costs that they occasion must be met by the general public”. Bresciani, Case 87/75. 13 Fiscal Barriers to Trade - Young  Cross-border element? It applies to internal borders too. In Legros, the CJEU struck down a charge applicable to goods imported to Réunion (French overseas territory). Local governments cannot impose CEE either. 14 Fiscal Barriers to Trade - Young  Article 30 has direct effects Direct effects were affirmed for the first time in a case concerning Article 12 EEC (now Article 30). Van Gend en Loos. (most major Treaty articles have been given Direct Effect at some point by now) 15 Fiscal Barriers to Trade - Young  Restitutionary claims Traders can claim back charges unlawfully paid, unless the costs have been passed onto third parties. Administrazione delle Finanze dello Stato v San Giorgio, Case 199/82. 16 Fiscal Barriers to Trade - Young  Permissible charges Sometimes permits and tests are required, and sometimes charges are required for those tests. Permissible if: 1. If the charge is applied systematically and to both national and foreign products; 2. If it constitutes the payment for a service and is proportionate to the costs of the service; 3. It is imposed by Union law. Source: Commission v. Germany, Case 18/87. 17 Fiscal Barriers to Trade - Young  Permissible charges: examples Commission v. Germany, Case 18/87 – fees on live animal import to cover inspections required by EU Law Commission v Netherlands, Case 89/76 - checks pursuant to mandatory obligations imposed by international conventions to which all Member States are party and treated in the same way. 18 Fiscal Barriers to Trade - Young  Article 30 – substantive importance Significant to the basics of free trade High importance then on external customs control – once goods are inside the EU, no checks and controls - strong anti-fraud initiatives - unified approach to external customs and co- operation 19 Fiscal Barriers to Trade - Young  BREAK 20 Fiscal Barriers to Trade - Young  Article 110 TFEU No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products. Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products. 21 Fiscal Barriers to Trade - Young  General rules on taxation Generally speaking, taxation falls outside the scope of EU law Internal market law does not provide for any specific tax regime Article 110 (1) focuses on discriminatory taxation between similar products Article 110(2) focuses on taxation on products in competition with one another, where differential taxation provides indirect protection to national products 22 Fiscal Barriers to Trade - Young  Article 110(1) TFEU It covers both direct and indirect discrimination between similar products. What is a similar product? CJEU usually does a case-by-case assessment by looking at the characteristics of two products. 23 Fiscal Barriers to Trade - Young  Case 184/85 Commission v Italy Consumption tax on bananas, but not other fruit Italy didn’t produce bananas Did produce apples, pears, peaches, plums, oranges Are bananas similar to these other fruits? Looked at sensory experience and whether they could satisfy the same consumer need Answer was no they are not similar 24 Fiscal Barriers to Trade - Young  Case 243/84 John Walker Whisky: a type of distilled alcoholic beverage made from fermented grain mash. Various grains (which may be malted) are used for different varieties, including barley, maize, rye, and wheat. Whisky is typically aged in wooden casks, generally made of charred white oak. Alcohol is 40% or more. Liqueur: an alcoholic beverage made from a distilled spirit that has been flavoured with fruit, cream, herbs, spices, flowers or nuts and bottled with added sugar or other sweetener. Liqueurs are typically quite sweet. They are usually not aged but may have resting periods to allow flavours to marry. Alcohol is 30% or less. The CJEU said Article 110(1) is not applicable because they have “manifestly different characteristics”. 25 Fiscal Barriers to Trade - Young  Article 110(1): Direct discrimination Fairly simple, cannot discriminate on grounds of nationality Must charge same rates of taxation between similar domestic and non-domestic products 26 Fiscal Barriers to Trade - Young  Article 110(1) - Payment of taxes Domestic and foreign products should also be treated equally when it comes to payment of taxes More lenient approach of domestic companies amount to direct discrimination Case C-55/79 Commission v. Ireland 27 Fiscal Barriers to Trade - Young  Article 110(1) - Indirect discrimination Measure that is not discriminatory in the face of it but has the effect of putting domestic products in an advantageous position. A concept you will frequently see in internal market law Example: Commission v. France (tobacco), the CJEU found that French law taxing light-tobacco cigarettes higher than dark-tobacco cigarettes was unlawful because French cigarettes were mostly made of dark-tobacco leaves. Example: Case 112/84, Humblot. Tax based on power ratings – above 16CV tax was higher, but no French car rated above 16CV 28 Fiscal Barriers to Trade - Young  Article 110(2) It concerns different products that are none the less in competition with each other, as revealed by the cross- elasticity of the demand. Consumers consider them substitutes for one another. If tax then causes indirect protection to other products, caught by 110(2) 29 Fiscal Barriers to Trade - Young  Article 110 (1) v Article 110(2) Are the products similar – then Article 110(1) If different, are they in competition with one another? If in competition, does taxation cause indirect protection – then Article 110(2) 30 Fiscal Barriers to Trade - Young  Commission v. UK (beer and wine) British law taxed wine higher than beer. Commission argued it was an indirect discrimination under Article 110(1) TFEU. How was this resolved? 31 Fiscal Barriers to Trade - Young  In competition? What is ‘in competition’ with something else Difficult to establish accurately, must be done case-by-case Product substitutability is significant Consumer products are not immutable - if taxation places them in different categories for consumers, this reduces substitutability 32 Fiscal Barriers to Trade - Young  Protective Effect? To what extent does the tax differential affect sales? Fine-tuned analysis required Cross-elasticity + level of tax differential compared to final price 33 Fiscal Barriers to Trade - Young  Commission v. UK (beer and wine) CJEU found that beer and (cheap) wine were in competition with each other (Article 110(2) TFEU) and ordered the UK to approximate the taxation of these two products. 34 Fiscal Barriers to Trade - Young  Member State Autonomy Aren’t Member States allowed to set their own tax rates? Yes but they are still bound by rules on free movement of goods Both fiscal rules (today) and non-fiscal rules (next week) 35 Fiscal Barriers to Trade - Young  Justifications under Article 110 There are justifications available for differential tax treatment Member States retain autonomy on tax, and full harmonization of tax is not the goal Direct discrimination cannot be justified Indirect discrimination can potentially be justified for policy reasons 36 Fiscal Barriers to Trade - Young  Justifications under Article 110 Some examples Case 140/79 Chemial Farmaceuti – taxing synthetic alcohol differently from fermented so as to promote agricultural fermentation Case C-213/96 Commission v France – taxing sweet wine less than liqueur wines in order to provide fiscal incentives for areas in which it was harder to grow wine Case C-132/98 Commission v Greece – progressively higher taxes based on cylinder volumes for environmental reasons 37 Fiscal Barriers to Trade - Young  Boundaries between 30 and 110 How do we tell which article applies? Article 30 and 110 generally mutually exclusive Customs Duties at the border v internal taxation Some cases where the line gets quite blurred – reality is complicated But significant distinction – prohibited under Article 30, some leeway under Article 110 38 Fiscal Barriers to Trade - Young  Boundaries between 30 and 110 Levies imposed on importers for non-customs reasons – Article 110 (Denkavit – annual levy to meet cost of veterinary inspections imposed at point of import) What if a state does not produce a product but taxes it nonetheless - Article 110 (Co-Frutta – avoids auto- classification as a CEE but can be) 39 Fiscal Barriers to Trade - Young  Conclusion Article 30 and 110 prohibit fiscal barriers to trade in most circumstances Some permissible charges available under both articles, but justifications very limited Usually clear distinction between the two areas Overall relatively significant within internal market law due to the existence of the customs union 40 Fiscal Barriers to Trade - Young  Workshop Fact pattern available on Brightspace Go over it, come up with answers Detailed, IRAC analysis 41 Fiscal Barriers to Trade - Young